Join the Revenue Revolution: CPQ is the Key to M aximizing Customer Life Time Value

1. Join the Revenue Revolution: CPQ is the Key to Maximizing Customer Life Time Value October 2014 RomitDey Lead to Cash/ US Practice Leader romit.dey@us.pwc.com Betty Watson CPQ Practice Lead betty.c.watson@us.pwc.com

2. Agenda New Business Models: a key Revenue Driver 01 Implications for Lead to Cash (L2C) 02 Integrated CPQ for Success 03 A single CPQ solution for all RTM for the entire Life Cycle 04

3. Agenda New Business Models: a key Revenue Driver 01 Implications for Lead to Cash (L2C) 02 Integrated CPQ for Success 03 A single CPQ solution for all RTM for the entire Life Cycle 04

4. CEO Agenda Highlight: Customer Experience CEOs are seeking growth by transforming to meet customer demand 82% of CEOs expect the global economy to stay the same or decline … and over half are transforming their businesses … customer demand is the first factor influencing change in strategy… • Key takeaways: • Addressing new & emerging customer expectations successfully is critical • New products and services being developed to meet customer needs • Agility and flexibility drive competitiveness Source: PwC 14th and 15th Annual Global CEO Surveys

5. Transforming the Customer Experience: New Business Models Companies are constantly striving to create compelling experiences through changes in every aspect of the shopping/ buying/ selling cycle Continuously Evolving Customer Value Propositions CPQ: Maximizing Customer Life time Value for all RTM

6. New Business Models Business models evolve quickly as new offerings are developed organically or acquired to drive growth across new and existing customer segments and global markets Productwith Services IntellectualProperty Services Experience Product 3 Productwith Experience Services/Experiencewith Product 7 6 1 2 5 4 How are your business models and revenue sources evolving? CPQ: Maximizing Customer Life time Value for all RTM

7. Agenda New Business Models: a key Revenue Driver 01 Implications for Lead to Cash (L2C) Implications for Lead to Cash (L2C) 02 Integrated CPQ for Success 03 A single CPQ solution for all RTM for the entire Life Cycle 04 CPQ: Maximizing Customer Life time Value for all RTM

8. Rise ofCustomer’s Voice The increasing importance of the customers voice heavily impacts the overall brand health of a company. Customers are no longer faceless data (cookies, email addresses), they are real people and more connected than ever. Connect with customers access anywhere enable insights SEAMLESS ACROSS CHANNELS Fractured Experiences The advent of new channels has created an inconsistent and disconnected experience across customer interaction points. Consumers today expect enterprises to offer a seamless experience across all channels. They can execute research in one channel, purchase in another, and get post-purchase support in still another. Information Overload It is estimated that four exabytes (1018) of unique information will be generated this year. Increasing competitive and consumer pressure requires companies to understand and act on info to enable real-time behavioral insights for decisions and adaptation. Mobility and Pervasive Presence Access and creation of information anywhere and anytime has an impact on traditional business and revenue models. With the development and deployment of mobile devices such as smart phones, tablets, and mobile applications, mobile users now have the ability to access and create information and entertainment anytime and anywhere. 8

9. L2C imperative: Delivering a seamless customer experience while meeting key business objectives Unified, seamless customer experience along with revenue acceleration and enhanced margins • Ease of doing business • Simplified interactions across the buying and usage lifecycle • Self-service for order and entitlement status • Seamless & automated processes for minimal response time through ordering & fulfillment • Bundled offerings comprising combination of H/W, S/W, services and/or content, tailored offerings for target segments • Intelligence-based offering recommendations, Try & Buy, Social Selling • Loyalty-based offerings • Combination of revenue streams initiated through one-time transactions • Insights through customer life cycle via entitlements and warranties • Early notification of service dues / expiration • Customer-centric offerings & enriched relationships • No-touch vs. high-touch – balancing self-service and bespoke service • All products offered through customer preferred channels • Flexible transaction capability via direct (web & mobile) and channel • Accessible customer and partner data for visibility and analytics • Seamless flexible transactions

10. L2C transformation: Significant complexities, with high business impact – Productwith Services IntellectualProperty Services Experience Product 3 Services/Experiencewith Product Productwith Experience 7 6 1 2 5 4 Seamless Customer/Partner Experience in L2C Processes CPQ: Maximizing Customer Life time Value for all RTM

11. Complexity Drivers for L2C New business models drive new operating needs; old business models continue to co-exist and add to overall complexity in operations Traditional Emerging ILLUSTRATIVE CPQ: Maximizing Customer Life time Value for all RTM

12. Example of Bundled Offerings: Combining hardware, software & services Customer exposure and risk Bundling makes sense when Customer acquisition costs are high Economies of scope in distribution. Low marginal cost of bundling multiple products Bundling can make prices lower and offer competitive differentiation Focus is on driving up ARPU • Pure (hard) bundlingoccurs when customers can only purchase an entire bundle • Mixed (soft) bundlingoccurs when customers can choose between purchasing the entire bundle or one of the separate parts of the bundle. TTM issues with complexity in offering structure and pricing Governance and x-functional coordination needs CPQ: Maximizing Customer Life time Value for all RTM

13. Successful transformation with value realization requires orchestrated changes across multiple dimensions 1 2 Ownership and Governance Core L2C Operations & Architecture GTM Model Offering Structure Key Enablers (Solutions & Technologies, Data, Organization) 3 CPQ: Maximizing Customer Life time Value for all RTM

14. L2C transformation: Enabling new business models – Ownership and Governance Customer experience design Business Process Architecture E2E solution architecture design aligned to GTM offerings Key capabilities model design (market differentiating, technical & operational) Technology solution implementation & integration Integrated master data management L2C customer analytics GTM strategy alignment with offering definition & key elements Revenue Models & Pricing models Core configurations and bundling possibilities All Routes to market Revenue Recognition & Tax implications, GTC Business value assessment Core L2C Operations & Architecture GTM Model Offering Structure Key Enablers (Solutions & Technologies, Data, Organization) CPQ: Maximizing Customer Life time Value for all RTM

15. Agenda New Business Models: a key Revenue Driver 01 Implications for Lead to Cash (L2C) 02 Integrated CPQ for Success Integrated CPQ for Success 03 A single CPQ solution for all RTM for the entire Life Cycle 04 CPQ: Maximizing Customer Life time Value for all RTM

16. Analysts Identify Configuration as Challenging, but Most Impactful to Positive Customer Experience Challenging Relatively Easy Moderate Productivity Customer Experience Source: Gartner

17. Accelerating Time to Market: End Customers Resellers Distribution Multi-Tier Channels Direct Sales 1-Tier Channels Online Store Offerings Solutions Creation Innovations CPQ: Maximizing Customer Life time Value for all RTM

18. Best-in-class integrated CPQ successfully addresses strategic goals and operational expectations New offerings/ propositions for new models, targeted customer segments and unique routes to market; analytics and insights for buying patterns and LCV 1 Flexible product hierarchy and offering structures for rapid bundle creation and setups; unique pricing models for one-time purchase and subscription models 2 Effective linkages between GTM propositions (offerings) from Marketing/ Product Management with Sales and seamless alignment with downstream Order Processing, Billing, Invoice to Cash operations 3 CPQ: Maximizing Customer Life time Value for all RTM

19. Integrated CPQ: From accelerating transaction flows to enabling new revenue models Key Considerations Trends Transformation Path Role of CPQ • New and evolving business models • Global regulatory complexities • Seamless customer and user experience • XaaS • Global Entities • Multiple countries • Changing Rev Rec needs • Instant On • 24/7 • Through Organic Growth or M&A • Corresponding Operating Models for Hybrid Business • Centralized vs. federated applications • Higher Degree of automation with country specific requirements • User Experience • Mobile • Amazon-like personalization • Offering structure and reduced time to market • Analytics & insights • Enabling downstream business processes • Country-specific offerings and pricing models • Flexibility in Go-To-Market thru framework and Governance • Self-service and expert user options • Mass customizations thru micro segments CPQ: Maximizing Customer Life time Value for all RTM

20. Integrated CPQ: From accelerating transaction flows to increasing Customer Lifetime Value (CLV) 50% or more of CLV for an established customer lies beyond the initial purchase transaction; this increases significantly with a transition to XaaS ? • Analytics and insights on buying patterns to drive renewals vs. refresh decisions; product features adoption and usage feedback loop to Product Management (R&D allocation and features development) , proactive targeting by Sales & Customer Success (reduced churn rates & retention costs) • Offerings defined by routes to market with targeted pricing models (enabled by guided selling), enhanced deal margins (with profitability analysis) and price-point trend analysis • Frictionless transactions and reducing administrative overhead in errors and canceled orders; self-service, expert user and assisted transaction flows; federated offering catalog CPQ: Maximizing Customer Life time Value for all RTM

21. A single engine that serves all RTM and the entire Customer Life Cycle: End Customers Resellers Distribution Multi-Tier Channels Direct Sales 1-Tier Channels Online Store Offerings Orders Renewals Solutions Creation Orders Innovations CPQ: Maximizing Customer Life time Value for all RTM

22. Integrated CPQ: Flexible product structure & offering definition Accelerated Time To Market (TTM), with cross-functional collaboration to drive Product-Offering-Item definition and setup Process Data CPQ: Maximizing Customer Life time Value for all RTM

23. Integrated CPQ: Enabling downstream operations Defined CPQ policies and processes along with robust offering structures enable the alignment of the front-end buying experience with downstream operations (billing, invoicing & payments) • CPQ is used to define Offering Characteristics, enable Sales & Channel in the L2C cycle, and directly impact overall business velocity, margin, and customer satisfaction • CPQ processes must be accessible internally (sales and product management) and externally (by direct customers and channel partners) • Robust product structure and integration with the underlying master data enable quick response in set-up as part of NPI activities as well as within the transactional processes • Customer/Partner experience is enhanced by providing theright product at the right time for the right price CPQ: Maximizing Customer Life time Value for all RTM

24. Integrated CPQ: Enabling downstream operations Optimized business processes and enabling solution architecture for targeted outcomes Seamless customer experience Partner self service Customer-centric solutions Segmented order flow Business Growth: Scalability & TTM Guided selling Valid configurations & bundles Automated deal approval Exceptions approval workflow Sales contracts integration Price waterfall with discount levers Operational Flexibility: Agility Upstream and downstream integration Attribute-based SKUs Integrated entitlement management system Re-usable configurations Multi-tier offers with pricing Bundling Improve Productivity: Degree of Automation Automated customer validation Quote lifecycle Attribute-based pricing CPQ: Maximizing Customer Life time Value for all RTM

25. Integrated CPQ: Illustrative maturity curve Level 1 Adhoc Level 2 Evolving Level 3 Integrated Excellence Level 4 World Class • Standalone CPQ solution, usually excel based, distributed by email • BU defined multiple, often inconsistent workflows and processes for quoting and approvals • Ad-hoc set of analytics tracked and measured • Difficult VSOE calculations due to lack of quoting details • Documented processes across product, pricing, sales and channel enablement • CPQ solution setup to capture and store transaction data for analytics • CPQ for new orders integrated with opportunity management for Sales; assisted CPQ for Channel partners • Mobile enabled during sales calls • IT maintained CPQ rules based on input from Product Managers • Defined workflows within the quoting and approval process • Minimal margin analysis and pricing analytics to influence pricing strategy • Offering & Pricing rules are imbedded in CPQ and integrated with costs, customer, contract, and entitlements master data • Granular pricing, margin, and discounting visibility for all pricing levers • Self-serve channel partner portal that integrates with deal registration • CPQ integrated with ERP with Order conversion and order status write back to Sales/Opportunities • Renewals are enabled by the CPQ engine for all routes to market with automatic VSOE calculation • Defined set of analytics captured and reported on a standard cadence • Solution based guided selling that drives incremental revenue • Full visibility into the quoting lifecycle across all channels • Co-branded two-tier partner portal • Integration with Pricing Analytics for optimized pricing • Integration with Sales Compensation that drives higher revenue and margin • Automated approval workflows for pricing, contract terms, or offering exception as part of the deal management process • Quote details that drive supply chain planning , revenue & margin projection • Business managed CPQ rules • On demand analytics available across functions Solution Maturity CPQ Maturity CPQ: Maximizing Customer Life time Value for all RTM

26. Integrated CPQ: Adoption & impact Identified business value drivers: High 3 2 4 5 1 Sales Enablement - Sales Productivity & Quote to Order velocity Channel Enablement - Channel Operations Efficiencies & Channel Revenue Renewal Quoting - Lower Sales Costs; higher Renewal Rate Costs (Operation & Sales) Solution Based Guided Selling - Incremental Revenue Analytics and Insights (feedback loop for product management, customer service and supply chain) Incremental Revenue Low High CPQ: Maximizing Customer Life time Value for all RTM

27. Integrated CPQ: Realizing the value Time to value is dependent on extent of usage and adoption of business operating policies and processes along with CPQ tools/ integrated system CPQ: Maximizing Customer Life time Value for all RTM

28. Agenda New Business Models: a key Revenue Driver 01 Implications for Lead to Cash (L2C) 02 Integrated CPQ for Success 03 A single CPQ solution for all RTM for the entire Life Cycle 04 CPQ: Maximizing Customer Life time Value for all RTM

29. Maximizing Customer Lifetime Value through all RTM: End Customers Resellers 1 4 3 3 2 2 1 4 Distribution Multi-Tier Channels Direct Sales 1-Tier Channels Online Store Offerings Orders Renewals Solutions Creation Orders Innovations The gift that keeps on giving: + + + = CPQ: Maximizing Customer Life time Value for all RTM

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